White Paper: Preliminary Assessment of Iowa s Energy Position

Transcription

1 White Paper: Preliminary Assessment of Iowa s Energy Position Prepared for the Iowa Energy Plan, IEDA, and Iowa DOT Prepared by TEConomy Partners, LLC February 22, 2016

2 Preliminary Assessment of Iowa s Energy Position Table of Contents I. Introduction... 1 A. Energy as an Economic Engine... 1 B. Defining the Energy Sector... 4 C. Structure of this Report... 5 D. Iowa in a National Socio-Economic Context... 7 II. Energy Supply and Demand in Iowa... 8 A. Iowa s Energy Profile Production... 8 B. Iowa s Energy Profile C. Iowa s Electricity Profile D. Iowa s Energy profile in Comparison to Surrounding s III. Energy as a Key Employer in Iowa A. Iowa s Employment Growth, Size and Specialization in Energy Sub-sectors B. Employment Compensation in the Iowa Energy Sector C. Labor Productivity in the Iowa Energy Sector D. Iowa s Energy profile in Comparison to Surrounding s III. Preliminary Scenarios for Energy Change in Iowa A. Initial Scenario Development Scenario 1: Continuation of Decade-plus Trends Scenario 1: Continuation of More Recent Trends Scenario 3: National EIA Forecasts Scenario 4: Production Forecast B. Scenario Development Next Steps Appendix A: Performance Comparison by Energy Category: Iowa and Surrounding Benchmark s... 34

3 I. Introduction This report, produced by TEConomy Partners, LLC addresses a component of the Task 1 deliverable of the Iowa Energy Plan defined as providing an assessment of current and future energy supply and demand in Iowa. The report, goes further, however, to examine the structure of the energy industry in Iowa and its role in employment and job growth within the state. The report presented herein represents just one early component of a larger scale comprehensive Iowa Energy Plan, and will be followed up by TEConomy Partners next phase of work in evaluating strengths, weaknesses, opportunities and threats (SWOT analysis) for Iowa in energy, and an assessment of energy research and development (R&D) and innovation core competencies in the state. Led by the Iowa Economic Development Authority and the Iowa Department of Transportation, and comprising a working committee of stakeholders and citizens from across Iowa, support for the project is provided by a consulting team comprising Inova Energy Group, LLC (Inova) as the lead consultant, together with specialized project support from Elevate Energy (Elevate) and TEConomy Partners, LLC (TEConomy). A. Energy as an Economic Engine The of Iowa has identified energy as an area of strategic importance to the state economy and for economic development. As shown in Figure 1, global and U.S. demand for energy and fuels, in all their forms, is unlikely to abate. Global demand projections indicate that more energy, in all its forms, will be needed to meet worldwide demand projections. Figure 1: Global Energy Demand, Recent Trends and Predictions by Source 1 1 Source: U.S. Energy Information Administration (EIA) International Energy Statistics database (as of November 2012). More recent data does exist yet as the EIA is changing its data release process. The next is likely to be published in the second quarter or

4 Domestically, U.S. economic growth projections, in combination with other actors such as energyefficiency measures and changing production profiles, lead to a much flatter projection for growth. In the U.S. natural gas and renewables are projected to see a rise in energy demand while most other sources are flat. Between 2016 and 2040, the U.S. Energy Information Administration projects overall U.S. demand to increase 7.1%. Figure 2: U.S. Energy Demand, Recent Trends and Predictions by Source Petroleum and other liquids Natural Gas Coal History 1980 Renewables Nuclear Liquid biofuels Both developed and developing nation economies depend on energy to power economic and societal activity. Because the demand for energy is assured moving into the future, energy may be seen as providing a relatively secure asset for those nations, regions and states having robust energy resources or the infrastructure and know-how needed to drive the further development of energy technologies and solutions to meet global and domestic needs. Energy is, however, a highly dynamic sector that is influenced by both global and local economic trends, and also by strategic concerns over dependence on foreign fuel imports, environmental concerns over emissions, and the policy decisions of governments. In addition, energy extraction, conversion and generation, distribution and use represent an integrated value-chain with substantial opportunities for advanced technology deployment and innovation. Opportunities for technology-based economic development exist for those states able to attract and grow R&D activity and innovation commercialization in energy and energy-related technologies. There are, therefore, multiple pathways that a state may follow in pursuing energy-based economic development: A state may exploit its natural fuel assets (such as oil, gas or biomass) to generate cost-effective power to give industry and commerce a competitive advantage. A state may export unrefined fuels or energy or it may further convert fuels into higher valueadded liquid fuels, chemicals or materials for export. 2

5 A state may build a robust R&D sector focused on academic and commercial research in energy and associated technologies, attracting-in external research funds. A state may build a significant manufacturing sector producing technologies for resource discovery, resource extraction, energy generation, energy transmission, and energy conservation. It may leverage its research assets to develop new energy products, technologies and services for sale in the domestic and international marketplace. A state may seek to undertake energy conservation and efficiency measures in order to increase energy resource availability for export, reduce energy imports, lessen environmental impacts of energy consumption, and generate jobs in providing energy efficiency services and products. Iowa, in seeking to develop a statewide energy strategy, is interested in examining all of the above. The seeks to have a detailed profile developed of energy s role in the Iowa economy, to identify trends likely to effect the impact of energy on the Iowa economy, to understand the key assets of the state in terms of the energy value chain, and potential opportunities to generate technology-based economic development through R&D and commercialization of energy innovations. The is also seeking to identify opportunities to conserve energy and reduce any negative externalities associated with energy development, generation or use. The of Iowa recognizes that the energy sector is a highly important sector and resource for the state, and seeks to enhance the sector further to grow the Iowa economy. There is an energy sector momentum in Iowa upon which to build with the renewable energy story, in particular, being a standout performer. The growth of the biofuels industry in Iowa, together with substantial growth in wind energy (in terms of both energy generation and technology/systems manufacturing), are very much indicative of the ability of the energy sector to generate new businesses, wealth, jobs and government revenues in the. Iowa now seeks to further refine its approach to energy-based economic development and energy-sector efficiencies through the development of a formal statewide energy strategy. The recognizes that achieving the full-realization of energy economic development promise in the will require a prioritization of strategic activities and investments, backed by a robust understanding of energy assets, opportunities and challenges in the, thus serving to guide actions. To advance effective public and private actions in Iowa focused on energy, it is critical for the and key stakeholders to have reliable information, identifying the near term growth opportunities in energy development for Iowa, together with a detailed and objective understanding of its assets and gaps. Based on this objective analysis a strategic action plan can then be developed to promote the growth and development of specific energy-based platforms most likely to generate economic growth for the. TEConomy Partners, LLC is responsible for major elements of the Iowa Energy Plan work pertaining to development of a quantitative understanding of Iowa s current position in energy, producing projections for energy sector development under potential development scenarios, and developing a SWOT (strengths, weaknesses, opportunities, and threats) assessment focused on energy resources and infrastructure, the current energy industry in Iowa, the energy sector workforce, and R&D and innovation within the energy sector and associated fields. This report represents an introductory white paper focused on defining the energy sector in Iowa and summarizing key quantitative data regarding the current status of energy supply, demand, and the key components of the energy value-chain within the. 3

6 B. Defining the Energy Sector In performing this analysis, TEConomy Partners has deployed a definition of the energy sector which is quite broad, encompassing a wide range of energy and energy-related subsectors across the energy value chain. Figure 2 shows the general structure of this value chain divided into three principal paths: The energy production and distribution value chain The development and production of energy technologies and associated services The supporting assets and infrastructure that influence the effectiveness of a state for energy sector activities and development (energy business location factors). Figure 2: The Energy Value-Chain, Associated Technology Areas and Key Location Factors Impacting Value-Chain Development Development of a comprehensive energy strategy requires consideration be given to the evaluation of conditions, assets, business trends, etc. associated with the key elements depicted on Figure 2. Clearly the energy sector is not geographically uniform across the United s, and some states will have significant assets in some areas but not in others. Iowa, for example, has relatively limited in-state fossil fuel resources, but does have substantial natural resources available for energy generation in terms of wind and biomass. Similarly, the R&D base and industry base and their associated core competencies varies geographically, and analysis is thus required to determine assets within Iowa. The overall strategy 4

7 to be developed by Inova Energy Group, their subcontractor Elevate Energy, and TEConomy Partners will address key elements pertaining to the energy value chain and energy industry and innovation ecosystem within Iowa. Assessing any economic sector, including the energy sector,first requires that it be defined. TEConomy Partners has developed an industry definition of the energy sector which comprises individual detailed, 6-digit North American Industrial Classification System (NAICS) industry sectors with these then aggregated into related groups (called energy subsectors ). Table 1 lists the NAICS included in the analysis of the energy industry. C. Structure of This Report This white paper is structured as follows: First Iowa s economy and basic demographics are presented to provide the reader with context regarding the size of the economy, state population and other characteristics. Second, TEConomy Partners presents an assessment of the energy sector s economic development profile in the in terms of employment across the industry as defined in Table 1 and outlines which sectors are growing or declining in importance as defined by employment volume. Third, an assessment is provided of employment compensation in the energy sector versus other sectors of the Iowa economy. Fourth, data is presented on energy supply in Iowa and the types of energy generated. Data are also provided for the states adjoining Iowa to, again, help place data in context. Fifth, data is provided profiling the consumption of energy by energy type in the. Data are also provided for the states adjoining Iowa. Sixth, some preliminary scenarios are presented regarding the future energy profile in the state extrapolating from recent trends. It should be noted that only relatively simplistic scenarios are shown in this white paper, and more detailed and sophisticated scenario projections will be made as more research is completed over the course of the full energy project. 5

8 Table 1: Industry NAICS Codes Included in Definition of Energy Sector in Iowa and Subsectors to which these NAICS are Assigned NAICS Code Industry Title Energy SubsectorSubsector Other Organic Chemicals Biodiesel Production Ethyl Alcohol Manufacturing Ethanol Production Crude Petroleum and Natural Gas Extraction Extraction/Resource Development Natural Gas Liquid Extraction Extraction/Resource Development Bituminous Coal and Lignite Surface Mining Extraction/Resource Development Drilling Oil and Gas Wells Extraction/Resource Development Support Activities for Oil and Gas Operations Extraction/Resource Development Support Activities for Coal Mining Extraction/Resource Development Petroleum Bulk Stations and Terminals Petroleum Products & Wholesale Petroleum and Petroleum Products Merchant Wholesalers (except Bulk Stations and Terminals) Petroleum Products & Wholesale Heating Oil Dealers Petroleum Products & Wholesale Liquefied Petroleum Gas (Bottled Gas) Dealers Petroleum Products & Wholesale Other Fuel Dealers Petroleum Products & Wholesale Turbine and Turbine Generator Set Units Manufacturing Other Renewable Energy & Storage Storage Battery Manufacturing Other Renewable Energy & Storage Primary Battery Manufacturing Other Renewable Energy & Storage Hydroelectric Power Generation Power Generation Fossil Fuel Electric Power Generation Power Generation Nuclear Electric Power Generation Power Generation Other Electric Power Generation Power Generation Electric Bulk Power Transmission and Control Power Transmission/Distribution Electric Power Distribution Power Transmission/Distribution Natural Gas Distribution Power Transmission/Distribution Steam and Air Conditioning Supply Power Transmission/Distribution Oil and Gas Pipeline and Related Structures Construction Power Transmission/Distribution Power/Communication Line and Related Structures Construction Power Transmission/Distribution Power, Distribution, and Specialty Transformer Manufacturing Power Transmission/Distribution Pipeline Transportation of Crude Oil Power Transmission/Distribution Pipeline Transportation of Natural Gas Power Transmission/Distribution Pipeline Transportation of Refined Petroleum Products Power Transmission/Distribution All Other Pipeline Transportation Power Transmission/Distribution Petroleum Refineries Refineries Note: The Other Renewable Energy and Storage subsector only includes NAICS sectors where a dominant proportion of the sector is involved in energy-related activities. For example, NAICS: Semiconductor and related device manufacturing includes solar photovoltaic cells, but the vast majority of employment and output in this sector is related to computer-related components, not renewable energy technology. 6

9 D. Iowa in a National Socio-Economic Context The following statistics serve to highlight the size and structure of the Iowa economy. Table 2: Contextual Statistics Data Variable Land area Iowa Statistics 55,857 square miles Context Iowa comprises 1.58% of the U.S. total area of 3,531,905 square miles Population Estimate, July 1, 2015, 3,123,899 Iowa comprises 0.97% of the total U.S. population which is 321,418,820 Population, percent change - April 1, 2010 to July 1, 2015 Labor Force Participation Rate (In civilian labor force, total, percent of population age 16 years+, ) 2.5% growth U.S. saw 4.1% growth. (Iowa s population has grown at only 61% of the national rate) 70.0% U.S. rate is 63.6% (Iowa has a higher labor force participation rate than the nation) Median household income (in 2014 dollars) $52,716 U.S. median household income is $53,482. So Iowa s is just slightly lower than the national figure. Total employer establishments, ,581 U.S. has 7,488,353 employer establishments. Iowa has 1.08% of the national number, about in line with Iowa s percent of U.S. population. Unemployment rate (December 2015) 3.4% U.S. rate was 5.0% Iowa is performing better on unemployment that the nation, with a rate 32% lower than the nation. Total Private Sector Employment 1,314,600 jobs Iowa accounts for 1.1% of the U.S. total private sector employment in Total Manufacturing Employment 216,100 jobs Iowa accounts for 1.8% of the U.S. total manufacturing employment in Total Gross Output $169.7 billion Iowa accounts for 1.0% of U.S. GDP in

10 II. Energy Supply and Demand in Iowa An energy strategy needs a starting point, a baseline measure of the energy sector in Iowa against which expectations for growth can be set and metrics for measuring development progress calibrated. TEConomy Partners accessed a broad range of information and data resources in order to develop a data-driven assessment of Iowa s current energy profile. 2 A. Iowa s Energy Profile - Production Iowa is a net importer of energy, consuming more than double the amount of energy than it produces (see Table 3). Based on this energy balance, Iowa is effectively importing more raw energy than it produces. Table 3: Iowa Total Energy and Production, 2013 Total Energy Iowa Iowa Production Difference (Importation) 1,516.5 trillion Btu trillion Btu 786 trillion Btu Source: Data from U.S. Energy Information Administration While clearly Iowa is not yet one of them, there are several U.S. states that have total production that exceeds total consumption (net energy exporting states), including: Alaska; Colorado; Kentucky; Louisiana; Montana; New Mexico; North Dakota; Oklahoma; Texas; Utah; West Virginia, and Wyoming. Each of these exporting states benefits from significant reserves of fossil fuels, something Iowa lacks. From an economic development standpoint, it may be concluded that: Conclusion 1: Iowa currently consumes more raw energy than it produces, and also imports more raw energy than it produces. Thus, from a basic economic policy standpoint, increasing energy production in Iowa will enhance Iowa s balance of trade and benefit the Iowa economy. Similarly, investments in energy efficiency will have benefits in terms of lowering the leakage of funds outside of the state that pay for imported energy. In terms of energy production, Iowa has a significantly less diversified production profile than the U.S. overall. As shown on Figure 3, Iowa s production of energy (defined as energy produced from domestic Iowa assets i.e. not imported coal, natural gas, fuel oil, etc.) comprised three primary production sources: Biomass feedstocks for ethanol (68%), renewable energy except ethanol (24%) and nuclear power (8%). The clear difference between Iowa and the U.S. overall is attributable to the lack of fossil fuel resources in Iowa whereas for the U.S. overall domestically produced feedstocks of coal, natural gas and crude oil dominate the production profile. 2 Data for the following tables and figures in Chapter II are from the U.S. Energy Information Administrations, Energy Data Systems (SEDS) database, (most currently available). 8

11 Figure 3. Production Share (Btu) by Major Source Category, 2013 U.S. Iowa Biomass feedstock for ethanol 2% Nuclear power (electricity) 10% Renewable energy except ethanol 9% Coal 25% Renewable energy except ethanol 24% Nuclear power (electricity) 8% Crude oil 19% Natural gas 35% Biomass feedstock for ethanol 68% In terms of total energy production, Iowa currently produces 0.9% of U.S. production a lower amount than might be expected given that Iowa comprises 1.58% of total U.S. land area. Again, this results from the land in Iowa not overlaying significant fossil fuel deposits. It is clear, however, that investment in renewable energy production has provided an important boost in net Iowa energy production. Without the use of Iowa biomass, wind, and to a lesser degree hydro, resources, Iowa s production versus consumption energy balance would be substantially worse. Conclusion 2: Without a significant base of fossil resources, Iowa has to currently import more than twice the raw energy than it produces. Investment in renewable energy has, however, improved the balance of energy equation. In terms of electricity generation, Iowa produced 56,853,000 Megawatt-hours (MWh) in 2014 (See Table 4) with the largest proportion of this electricity production coming from coal-fired power plants (59.3% of Iowa s electricity production). The next highest proportion of generated electricity within Iowa comes from renewable wind power (28.7%) and nuclear power which generated 7.3% of Iowa s electricity production in It should be noted that total electric power generation in Iowa has increased significantly since As Table 4 shows, in 2001 total utility-scale production of electricity in the state totaled 40,659,000 MWh which grew to 56,853,000 MWh in 2014 (an increase in production of 16,194,000 MWh, or 39.8%). Total electricity produced by coal decreased 2.69% over this time period dropping from 34,665,000 MWh in 2001 to 33,733,000 MWh in The growth in total electricity generation in Iowa between 9

12 2001 and 2014 has been almost primarily driven by the growth in wind generation which rose from 488,000 MWh in 2001 to 16,307,000 MWh in 2014, a 3,241.6% increase. Some other electric power generation sources saw gains in production between 2001 and Natural gas-powered electricity generation grew by 131.5% while biomass grew by 155.8%. Petroleum liquids declined, but pet coke increased substantially, and nuclear saw moderate percent gains. Table 4: Iowa Annual Electricity Generation, Change in Generation Mix (Megawatt-hours) Electricity Generation Source Megawatthours of Production 2014 Megawatthours of Production Percent Change Percent of 2014 Iowa Electricity Generated by this Source TOTAL 40,659,000 56,875, % 100.0% Coal 34,665,000 33,733, % 59.31% Wind 488,000 16,307,000 3,241.6% 28.67% Nuclear 3,853,000 4,152, % 7.30% Natural Gas 593,000 1,373, % 2.41% Hydroelectric 845, , % 1.55% (Conventional) Biomass 104, , % 0.47% Petroleum Liquids 99,000 59, % 0.10% Petroleum Coke 4,000 85,000 2,025% 0.15% Solar (All - Distributed 0 21, % and Utility) Other 8, % Source: Data from U.S. Energy Information Administration Conclusion 3: Since 2001 Iowa has increased its electric power generation by 39.9%. The vast majority of this new generation has come in the form of renewable wind power. The net effect has been a significant decrease in the overall percentage of Iowa s electricity generated by fossil fuels which declined from 87% in 2001 to 62% in Renewables-based electricity generation has been rising dramatically in Iowa, comprising 17,473,000 MWh of generation in 2014 (30.7% of the s electricity production). The majority of the renewables production is wind generated (93.3% or renewables generation). The changing face of electric power generation in Iowa is well illustrated by the fact that in 2001 just 1.2% of Iowa s electricity was generated by wind (with 85.3% generated by imported coal), whereas in 2014 wind generated 28.67% of Iowa electricity (and coal dropped to 59.31%). B. Iowa s Energy Profile - Just as Iowa s energy production profile differs from that of the U.S. overall, so does Iowa s energy consumption. Iowa s economy is more industrially-intensive than the U.S. economy overall, and this is reflected in the fact that Iowa accounts for 2.4% of industrial energy consumption in the U.S. but comprises only 0.97% of the U.S. population. It is predominantly Iowa s strong industrial economy, which includes agriculture and biofuels production in addition to manufacturing, that accounts for 3 Includes both utility scale plants and IPP/CHP electricity generation, plus distributed solar. U.S. Energy Information Administration. 10

13 Iowa s energy consumption profile looking different to that of the U.S. overall. Iowa's three largest manufacturing industries are machinery, food and beverages, and chemicals. Taken together these three industries account for almost two-thirds of Iowa's manufacturing gross domestic product (GDP). Iowa consistently ranks among the top 10 states in the nation in share of GDP from manufacturing. Transportation is the state's second largest energy-consuming sector. Figure 4. (Btu) Share by End Use Sector, 2013 Iowa U.S. Transportation 19.8% Residential 16.7% Transportation 27.5% Residential 21.8% Commercial 14.2% Commercial 18.4% Industrial 49.3% Industrial 32.3% Table 5. Energy s by End Use Sector, 2013 Sector Iowa 2013 (Billion Btu) Percent Change, 2013 Share of U.S. U.S (Billion Btu) Percent Change, Residential 253, % 1.2% 21,181, % Commercial 215, % 1.2% 17,894, % Industrial 747, % 2.4% 31,378, % Transportation 299, % 1.1% 26,689, % Total Energy 1,516, % 1.6% 97,144, % Conclusion 4: Iowa, with a more industrial economy than the U.S. overall sees industry (which includes agriculture as well as manufacturing) consuming considerably more power as a percentage of consumption. It should be noted that Iowa industry overall has been growing faster than energy consumption in Iowa s industrial sector. In other words, the industrial sector of the Iowa economy is becoming less energy intensive over time, or more energy efficient in its operations. 11

14 Examining consumption data by energy source again reveals a consumption profile quite different to that of the United s overall (Figure 5 and Table 6). Iowa uses renewable energy to a much greater degree than the nation does overall, and also uses more coal. It is less reliant than the U.S. overall in the use of natural gas, gasoline and other petroleum, and nuclear power. Figure 5. (Btu) Share by Major Source Category, 2013 Iowa U.S. Renewable Energy 24.6% Coal 25.7% Renewable Energy 9.4% Nuclear 8.5% Coal 18.6% Nuclear 3.6% Fuel Oil 8.9% Fuel Oil 8.3% Natural Gas 19.6% All Other Petroleum 4.9% Gasoline 12.7% Natural Gas 27.6% Note: Shares do not account for Net Interstate Flow of Electricity (Exports) All Other Petroleum 10.6% Gasoline 16.9% Table 6: Energy s by Major Energy Category, 2013 Major Energy Category Iowa 2013 (Billion Btu) Percent Change, 2013 Share of U.S. U.S (Billion Btu) Percent Change, Coal % 2.2% 18, % Fuel Oil % 1.7% 8, % Gasoline % 1.2% 16, % All Other Petroleum % 0.7% 10, % Natural Gas % 1.1% 26, % Nuclear % 0.7% 8, % Renewable Energy % 4.2% 9, % Net Interstate Flow of Electricity (Export) (46.8) 354.1% N/A N/A N/A Total Energy 1, % 1.6% 97, % To provide additional context to Iowa s changing portfolio of energy consumption, Figure 6 profiles the consumption mix in terms of the share of Iowa s total consumption for four years the starting year of the analysis (2000), the pre-recession peak (2007), the beginning of the economic expansion (2010) and the most current data (2013). These data also include the context of Net Interstate Flow Electricity 12

15 where Iowa was as an importer of electricity in 2000 and 2007, but a net exporter of electricity in 2010 and Figure 6. Iowa Energy Share (Btu) by Major Source, Select Years 2% 0% 0% 5% 2% 1% 1% 4% 0% 3% 1% 15% 6% 9% 17% 10% 3% 2% 15% 4% 10% 19% 1% 1% 1% 6% 10% 15% 14% 3% 1% 0% 2% 4% 13% 12% 4% 4% 9% 9% 19% 20% Net Interstate Flow of Electricity Wind Solar/PV Geothermal Other Biomass Fuel Ethanol Hydroelectric Power Nuclear Electric Power Other Petroleum Motor Gasoline 37% 34% 33% 27% LPG Distillate Fuel Oil Natural Gas -5% -3% Conclusion 5: Iowa differs in its energy consumption versus the U.S. overall in terms of using renewables and coal considerably more than average and other major fossil fuel resources (natural gas and petroleum/gasoline) less. Iowa s expenditure profile in terms of the use of energy in the is not all that different than that of the U.S. overall (Figure 7). The main difference, again, is that Iowa spends a higher percent of its total energy dollars on industrial use (25.5%) versus the nation (17%). 13

16 Figure 7. Energy Expenditures Share ($ millions) by End Use Sector, 2013 Iowa U.S. Transportation 47.2% Residential 16.0% Transportation 51.8% Residential 18.2% Commercial 11.4% Commercial 13.0% Industrial 25.5% Industrial 17.0% Table 7. Energy Expenditure s by End Use Sector, 2013 Sector Iowa 2013 Expenditures ($ millions) Percent Change, Share of U.S. U.S Expenditures ($ millions) Percent Change, Residential $2, % 1.1% $250, % Commercial $1, % 1.1% $179, % Industrial $4, % 1.9% $233, % Transportation $8, % 1.1% $712, % Total Energy Expenditures $17, % 1.3% $,1375, % Between 2000 and 2013 Iowa saw its total expenditures on fuels increase at a somewhat faster rate than the U.S. overall with Iowa expenditures increasing 129.9% versus the nation s 119.9%. The expenditure categories seeing the largest percent expenditure increases were fuel oil (249.5%), biomass (wood and waste, 229.3%) and motor gasoline (148.6%). Expenditures on each of these three energy sources increased at a rate higher than they did in the nation overall. Iowa s expenditures on retail electricity did not increase much more than they did nationally (increasing 62.8% versus 60.7% in the nation). Overall, expenditures in Iowa for energy increased 10.9% more than they did for the nation overall between 2000 and

17 Table 8. Energy Expenditure s by Major Energy Category, 2013 Major Energy Category Iowa 2013 Expenditures ($ millions) Percent Change, 2013 Share of U.S. U.S Expenditures ($ millions) Percent Change, Primary Use Fuels $13, % 1.3% $1,003, % Coal $ % 2.6% $6, % Natural gas $1, % 1.7% $114, % Motor gasoline $5, % 1.2% $467, % Fuel oil $3, % 1.7% $220, % Liquefied petroleum gases (LPG or propane) $1, % 2.5% $55, % All other petroleum products (except Gasoline, Fuel Oil, LPG) $ % 0.4% $131, % Biomass (Wood and waste) $ % 0.5% $6, % Retail Electricity -- All Fuels & Sources incl. Nuclear and Renewable $3, % 1.0% $372, % Total Energy Expenditures $17, % 1.3% $1,375, % Note: Primary use captures the expenditures on fuels put to direct use. The use of these fuels for electricity generation is captured within the Retail Electricity category. Conclusion 6: Iowa s total energy expenditures for energy have increased at a rate 10.9% over expenditures in the nation between 2000 and

18 C. Iowa s Electricity Profile In terms of electricity consumption, Iowa s industrial sector consumes a considerably higher percent (42% of all electricity in the ) than does the nation overall (26.3%). Figure 8. Electricity (Btu) by End Use Sector, 2013 Iowa U.S. Industrial 42.0% Transportation 0.0% Residential 31.3% Industrial 26.3% Transportation 0.2% Residential 37.4% Commercial 26.6% Commercial 36.1% Table 9. Electricity s by End Use Sector, 2013 Sector Iowa 2013 (Billion Btu) Percent Change, 2013 Share of U.S. U.S (Billion Btu) Percent Change, Residential 50, % 1.1% 4,759, % Commercial 42, % 0.9% 4,586, % Industrial 67, % 2.0% 3,338, % Transportation 0 0.0% 0.0% 26, % Total Energy 159, % 1.3% 12,710, % A similar situation holds in overall electricity expenditures (Figure 9 and Table 10). 16

19 Figure 9. Electricity Expenditures by Sector, 2013 Iowa U.S. Industrial 29.3% Transportation 0.0% Residential 42.9% Industrial 17.2% Transportation 0.2% Residential 45.5% Commercial 37.2% Commercial 27.9% Table 10. Electricity Expenditures by Sector, 2013 Sector Iowa 2013 Expenditures ($ millions) Percent Change, 2013 Share of U.S. U.S Expenditures ($ millions) Percent Change, Residential $1, % 1.0% $169, % Commercial $1, % 0.8% $138, % Industrial $1, % 1.7% $63, % Transportation $ % 0.0% $ % Total Electricity Expenditures $3, % 1.0% $372, % 17

20 D. Iowa s Energy Profile in Comparison to Surrounding s Comparing Iowa s energy consumption to national overall statistics provides a useful perspective, but so too does comparing Iowa s energy consumption to the six states that border Iowa: Minnesota; Wisconsin; Illinois; Missouri; South Dakota, and Nebraska. By comparing these North Central U.S. states to Iowa, perspective can be gained on how Iowa differs in energy consumption versus similar surrounding states. It should, of course, be noted that these seven states are not all the same in terms of their fundamental natural energy resources. Several contain significant fossil fuel resources (primarily coal, but also natural gas and crude oil) whereas Iowa does not. Similarly, differences in topography, hydrology, soils and meteorological conditions mean differing potentials for renewable energy production and in-state consumption. Table 11 presents the overall summary statistics for Iowa and the benchmark states. Obviously, given significantly different population sizes total consumption varies significantly so data have been normalized by TEConomy Partners in terms of consumption per capita and total energy consumption as a percent of state GDP, for more appropriate comparisons. Table 11. Energy, Iowa and Benchmark s, 2013 Total Energy (Million Btu) Total Energy (Million Btu) per Capita Energy Intensity of GSP* Iowa 1,516, Illinois 4,011, Minnesota 1,859, Missouri 1,857, Nebraska 871, South Dakota 390, Wisconsin 1,804, *Note: Energy Intensity of GSP is calculated as total energy consumption as percent of GDP. The benchmark data show that Iowa has the highest consumption of energy per capita among the benchmark states (where the range runs from a low of 311 million Btu per capita in Illinois, to Iowa s high of 490). Iowa similarly has the highest energy consumption intensity as measured by energy consumption as a percent of GDP. These high normalized ranks largely reflect the significant industrialoriented energy consumption within Iowa. 18

21 Table 12 examines statistics for the benchmark states in terms of energy expenditures. Again, Iowa has the highest expenditures per capita on energy ($5, per capita for 2013). In terms of energy expenditure intensity, South Dakota has the highest (10.54) closely followed by Iowa at (10.50). Table 12. Energy Expenditures, Iowa and Benchmark s, 2013 Total Energy Expenditures ($ million) Total Energy Expenditures per Capita (S) Energy Expenditure Intensity of GSP* Iowa $17, $5, Illinois $49, $3, Minnesota $24, $4, Missouri $26, $4, Nebraska $10, $5, South Dakota $4, $5, Wisconsin $24, $4, *Note: Energy Expenditure Intensity of GSP is calculated as total energy expenditures as percent of GDP. Conclusion 7: For Iowa, undertaking a state energy strategy is particularly important since energy consumption and expenditure per capita is higher than it is in surrounding states, as is (generally) the intensity of energy use as measured as a percentage of state GDP. Appendix A provides further detail on comparative consumption of specific energy resources across Iowa and the benchmark states. Benchmark profiles are provided for: Coal Natural Gas Petroleum Motor Gasoline Fuel Oil Propane Nuclear Renewable Fuels (with break-outs for wind, biomass and ethanol). 19

22 III. Energy as a Key Employer in Iowa A. Iowa s Employment Growth, Size and Specialization in Energy Sub-Sectors As discussed in Chapter I, TEConomy Partners uses a fairly broad definition of energy and energy-related sectors of the economy (see Table 1). The definition not only includes industry sectors engaged in extracting energy resources, generating power, or distributing and retailing power, but also includes the many related industry sectors that provide tools, technologies and services to the energy industry or to consumers of energy. In effect, the definition used captures and breaks-out the key components of the energy sector value-chain. Examining Iowa s energy profile in terms of this value-chain and the jobs it generates in the state is important, and generating a baseline profile of employment and employment trends across the energy value-chain is a key starting point for strategic planning. Table 1 shows the full complement of 32 NAICS used to define the overall energy sector in Iowa. TEConomy Partners assigned each of these individual NAICS to one of eight subsectors for analysis purposes: Biodiesel Production Ethanol Production Extraction and Resource Development Other Renewable Energy and Storage Petroleum Products and Wholesale Power Transmission and Distribution Power Generation Refineries. Table 13 summarizes most recently available establishment and employment data (2014) for these eight subsectors and also shows for comparison total private sector and total manufacturing employment. In total, the Iowa energy sector consists of 849 establishments, with a combined employment of 16,292 (1.3% of the state s total private sector labor force). The overall energy sector currently is relatively under-concentrated in Iowa and therefore not seen as a state specialization since the location quotient (LQ) 4 for this level of energy employment reaches only 0.78 (a state specialization, as designated by TEConomy, requires an LQ of 1.2 or higher). At an LQ of 0.78, the energy sector in Iowa employs approximately 22% fewer workers than would be expected, given the energy sector s overall share of employment in the national economy. 4 Location quotients (LQs) are a standard measure of the concentration of a particular industry in a region relative to the nation. The LQ is the share of total state or regional employment in the particular industry divided by the share of total industry employment in the nation. An LQ greater than 1.0 for a particular industry indicates that the region has a greater relative concentration, whereas an LQ less than 1.0 signifies a relative underrepresentation. An LQ greater than 1.20 denotes employment concentration significantly above the national average. In this analysis, regional specializations are defined by LQs of 1.20 or greater. 20

23 Table 13: Iowa Establishments, Employment and Location Quotients for the Total Energy Sector and Individual Subsectors, 2014 Energy Subsector Iowa Establishments, 2014 Iowa Employment, 2014 Iowa Location Quotient, 2014 Iowa Employment % Change, U.S. Employment % Change, Total Energy Sector , % 18.6% Power Transmission/ Distribution , % 25.6% Other Renewable Energy & Storage 12 2, % -7.7% Power Generation 99 2, % -42.3% Ethanol Production 40 1, % 225.1% Petroleum Products & Wholesale 242 1, % -20.5% Biodiesel Production % -5.2% Refineries % -7.6% Extraction/Resource Development % 91.7% Total Private Sector 6 93,351 1,280, % 5.5% Total Manufacturing 4, , % -25.8% Source: TEConomy Partners analysis of Bureau of Labor Statistics, QCEW data and enhanced file from IMPLAN. While the overall energy sector in Iowa is not a state specialization (as measured by location quotient) this should not obscure the fact that employment is highly concentrated among several key energy subsectors, with four ethanol production (LQ=15.71), other renewable energy & storage (LQ=4.42), power generation (LQ=1.41), and biodiesel production (LQ=1.37) all rising to the level of state specializations. Several of the subsectors have been significant new job generators for Iowa over the assessed time period of 2001 through Overall the energy sector in Iowa employs 16,292 personnel and increased employment by 22.2% between , larger than the growth seen nationally. Notably, biodiesel production grew by 310.4% and other renewable energy and storage grew employment by 143.6% over this time period (also reaching 2,606 jobs in 2014) while ethanol production truly emerged as a state industry sector growing by 3,838% to reach 1,845 jobs. In all three cases, these sectors far outpaced growth rates in those subsectors within the nation overall. Conclusion 8: Though the energy sector overall is a currently not a specialized industry for Iowa, distinct niches (subsectors) exist within Iowa that are specialized and do show significant growth. In addition, the energy sector has been a significant job generator, far outpacing overall private sector growth in the state. Overall, employment growth in Iowa s energy sector, benchmarked against national employment growth, has performed as well as the nation overall, and far out-performed average private sector industry growth in the state. Structural changes in the energy industry led to declines in the early 2000 s in Iowa and the U.S. overall. After this structural decline, the energy sectors employment began a 5 Sub-sectors shown comprise the individual NAICS listed on Table 1. 6 This category, for comparison purposes shows all private sector jobs in the state (i.e. not just those in the energy sector). 21

24 steady period of growth, for both Iowa and the U.S., with the exception of slight employment declines during the recessionary period between (Figure 10). It should be noted that Iowa s energy sector actually only experienced one employment decline (2010). Between 2010 and 2014, a period of economic expansion, energy sector employment in Iowa grew 14.9% compared to 16.5% growth nationally (this in part due to steeper recessionary declines in the U.S. energy sector). Conclusion 9: The Iowa Energy sector has seen significant net growth in employment since 2001, performing at the same level as the U.S. Energy sector and outperforming Iowa s overall private sector. Figure 10: Total Energy Sector Employment Trends for Iowa and the U.S. for 2001 through 2014 Employment Index (2001=100) Iowa & U.S. Employment per Year, Indexed to 2001 IA Total Energy Cluster IA Total Private Sector U.S. Total Energy Cluster U.S. Total Private Sector Source: TEConomy Partners analysis of Bureau of Labor Statistics, QCEW data and enhanced file from IMPLAN. By analyzing the individual energy subsectors location quotients and comparative employment growth rates versus the nation, it is possible to see which energy subsectors are performing most strongly for Iowa. The bubble chart (Figure 11) is divided into four quadrants with quadrants to the right of the vertical axis in the center of the chart representing areas of employment growth over the time period evaluated ( ) and the quadrants to the left containing sectors that saw employment decline. Quadrants above the horizontal line represent state specialization industries, defined by their location quotient being greater than 1.0. Clearly, the ideal place from a state perspective for a subsector to be is the upper right quadrant (specialized and growing), while the bottom right quadrant represents promising areas in which the state is experiencing growth, but not yet achieved specialization status. The size of each bubble is proportional to the level of employment in that energy subsector. As Figure 11 shows, the Iowa energy sector currently contains two robust star energy subsectors that are both specialized and growing, these being other renewable energy and storage (2,606 employees 22

25 in 2014) and ethanol production (1,845 employees in 2014). The power generation subsector is also a state specialization for Iowa, but experienced employment declines over the period (2,520 employees in 2014). Overall, the significant size of the power transmission/distribution sector is apparent, but this subsector has held at slightly below the national average specialization with a slight employment decline during the period. Two subsectors extraction/resource development and refineries while considered to be emerging potential quadrant have significant growth rates due to extremely small 2001 employment. It should also be noted that while the state refineries subsector includes 39 employees; it is highly likely that these three refinery establishments are actually involved in petrochemical-related refining not energyrelated production. Figure 11: Iowa Energy Employment Size, Growth, and Degree of Specialization (LQ) by Subsector, for Quadrant 2 Transitional 6.50 Actual LQ = Quadrant 1 Stars 5.50 Ethanol Production Actual Percent Growth = 3,838.6% 4.50 Other Renewable Energy & Storage Location Quotient, Power Generation Petroleum Products & Wholesale 1.50 Biodiesel Production -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% Quadrant 3 Divergent Power Transmission/ Distribution Extraction/Resource Development Employment Percent Change, Refineries Source: TEConomy Partners LLC analysis of Bureau of Labor Statistics, QCEW data and enhanced file from IMPLAN. Quadrant 4 Emerging Potential Conclusion 10: Within the energy sector two subsectors related to renewable energy ethanol production and other renewable energy & storage are the high performing subsectors for Iowa. However, more than 40% of the total energy sector s employment is in power transmission/distribution. In breaking the data down to a finer level of granularity, it is evident that five of the 32 energy NAICS industries are large (> 1,000 jobs) and specialized (LQ>1.2), with three of these five also exhibiting substantial employment growth (Table 14). These five industry components account for two-thirds of 23

26 the total Iowa energy sectors employment in The significant growth of the state ethyl alcohol (ethanol) production is clearly evident, as well as significant growth in the manufacture of turbine and turbine generator sets used in a variety of energy-related applications from wind turbines, to hydroelectric turbines, to turbines sets used in other power generation applications. Table 14: Performance of Large & Specialized Detailed Iowa Energy Sectors, Energy Subsector Ethanol Production Other Renewable Energy & Storage Power Generation Power Transmission/ Distribution NAICS Description Ethyl Alcohol Manufacturing (325193) Turbine and Turbine Generator Set Units Manufacturing (333611) Fossil Fuel Electric Power Generation (221112) Electric Power Distribution (221122) Power/Communication Line and Related Structures Construction (237130) Establishments Employment Location Quotient (LQ) 2014 Number, 2014 Growth, Jobs, 2014 Growth, % 1, % % 1, % % 1, % % 2, % % 2, % 1.20 Source: TEConomy Partners analysis of Bureau of Labor Statistics, QCEW data and enhanced file from IMPLAN. Of the 31 NAICS energy and energy-related industries captured in the broad energy definition, Iowa currently has employment in 23. Each of these industries, each of the eight energy subsectors, and the overall Iowa energy sector are analyzed according to the Industry Targeting Analysis graphic (Figure 12) which divides these industries into relative performance categories based on their performance on location quotients, growth or decline in employment, and growth or decline in employment share versus the nation. The results of this targeting analysis are shown in Table It should be noted, that within the limitations placed on this analysis by the nature of the North American Industrial Classification System (NAICS) there is a strong likelihood of energy-related employment also spread throughout a variety of additional NAICS codes, which are not primarily energy-related in nature. For example, a company making foam insulation, would be included within a broader plastics-related NAICS code that includes substantial non-energy-related employment. 24

27 Figure 12. Industry Targeting Analysis for Iowa Energy Sector and Subsectors Universe of Energy Oriented Business Sectors Biodiesel Production Ethanol Production Extraction/Resource Development Other Renewable Energy & Storage Petroleum Products & Wholesale Power Generation Power Transmission/Distribution Refineries Total Energy Cluster Is the industry a specialization for Iowa? Location Quotient > 1.20 Current Specialization Biodiesel Production Ethanol Production Other Renewable Energy & Storage Power Generation Location Quotient <=1.20 Not a Current Specialization Extraction/Resource Development Petroleum Products & Wholesale Power Transmission/Distribution Refineries Total Energy Cluster From 2001 to 2014 did the industry grow in the of Iowa? Employment Growth Biodiesel Production Ethanol Production Other Renewable Energy & Storage No Employment Growth or Employment Decline Power Generation Employment Growth Extraction/Resource Development Refineries Total Energy Cluster No Employment Growth or Employment Decline Petroleum Products & Wholesale Power Transmission/ Distribution Did Iow a industry gain competitiv e share from 2001 to 2014 Share Gain (Strong Performer) Biodiesel Production Ethanol Production Other Renewable Energy & Storage Share Loss (Lagging Performer) Share Gain (Constrained Performer) Power Generation Share Loss (Poor Performer) Share Gain (Strong Performer) Extraction/ Resource Development Refineries Total Energy Cluster Share Loss (Lagging Performer) Share Gain (Constrained Performer) Power Transmission/ Distribution Share Loss (Poor Performer) Petroleum Products & Wholesale Stars Specialized, growing and gaining national share (growing at faster rate than U.S. overall) Opportunities Specialized, and growing but not as fast as U.S. overall Higher Priority Retention Targets Specialized, but prospects limited due to external trends, but outperforming U.S. overall Lower Priority Retention Targets Specialized, but prospects limited due to local weaknesses Emerging Strengths Not yet specialized, but growing and gaining share. May repres ent up and coming stars Emerging Opportunity Not specialized, but is gaining employment albeit not as fast as U.S. overall Prospects limited due to weak base and external trends Not specialized, not gaining employment, but lost jobs slower than U.S. overall Prospects very limited Not specialized, not growing, and actually losing Jobs faster than U.S. overall Source: TEConomy Partners analysis of Bureau of Labor Statistics, QCEW data and enhanced file from IMPLAN. B. Employment Compensation in the Iowa Energy Sector A goal of economic developers is not just to help promote the creation of jobs, but also to particularly encourage the generation of high quality jobs jobs paying above average, family-sustaining wage levels. Bureau of Labor Statistics data confirm that Iowa energy jobs indeed are high-quality paying a 2014 average annual wage of $73,412 in 2014 which is considerably higher than the state s average private sector wage of $41,964. Jobs in Iowa s power generation and power transmission/distribution energy subsectors are particularly high paying, with an average of $102,264 and $80,135 respectively. In fact, all eight of Iowa s energy subsectors pay at or above the state s average annual wage. 25